Colonial Williamsburg: Can History Beat Failing Economy?

The added crowds in town for the Jamestown 2007 commemoration helped boost Colonial Williamsburg attendance by 5 percent and revenue by 15 percent in 2007.

In addition to this one-time event, CW scored another massive investment gain and opened all the facilities that have been built or renovated to ensure the non-profit's future. But all of these favorable events still could not stop the persistent annual loss -- which hit $37 million in 2007 -- the institution has struggled with for years.

With consumer confidence weak, stock market woes and no one-time big event like Jamestown 2007 in the works, it could be a challenging 2008 for CW. But directors of the non-profit remain confident that CW is only in the early stages of benefiting from its new revenue-generating attractions and facilities, and will close the deficit over time.

"It is our intention to reduce the deficit, that we focus on expenses," said Robert Taylor, senior vice president for finance at CW, "but we must rely on increases in revenues. And our investments in facilities are intended to achieve that purpose."

For now, Taylor says CW knows it is not immune to the economy and soaring gas prices. Officials are trying to be smart about marketing and hope to feed off recent good publicity. Advertising has been aimed at promoting one-tank-of-gas trips, and CW is reconsidering the value of an ad right now in its farther-off markets like Boston.

"We're trying to be thoughtful and flexible in our marketing," said Taylor.

The endowment posted a strong investment return in 2007 of 17.7 percent, which helped the fund earn $132 million. The third straight year of increasing attendance after a long decline is a very positive sign. Nonetheless, the operations of the non-profit continued to lose money, falling $37 million short for the year.

The CW loss from its operations was a $9 million improvement from the 2006 results, but the endowment also contributed almost $9 million more to cover the costs of running the non-profit than it did in 2006. The strong endowment return enabled CW to pay down some of its long-term debt it acquired in recent years as it made renovations and upgrades key to its future.

As attendance slid from the 1990s all the way into 2004, CW was planning for a future that would include more resort and conference business, as well a more interactive experience in the Historic Area. Since bottoming out in 2004, total attendance has climbed about 10 percent total over the last few years.

Many of those future generators of revenue and repeat business were launched in the last two years. The Williamsburg Lodge has been restored and the Spa of Colonial Williamsburg and new Abby Aldrich Rockefeller Folk Art Museum opened. The new Revolutionary City street theater program has been drawing crowds.

In addition to these changes, 2007 brought in visitors for the Jamestown events, including a visit from Queen Elizabeth and high-profile democracy forums. Between the upgraded facilities opening and the one-time Jamestown event, the ticket sale increase in 2007 was still about the same as 2006.

The revenue increase of 15 percent was much stronger than the ticket sale gain of 5 percent, reflecting how the hospitality money is not always coming from CW Historic Area tourists. Taylor expected it would take time to hook up with meeting planners and win convention business, as many book years ahead, but the outlook is positive so far.

"The reception of the new lodge and conference center was extraordinary," said Taylor.

One sign of potential trouble ahead is the stock market and economy.

With consumer confidence weak, tourists' spending at CW could get hit this year. Additionally, a battered stock market could kill the endowment returns. The amount of endowment money used by CW for its operations each year is a set percentage of the total endowment average over a three year period.

If the market has a major impact on the endowment, it could affect the degree to which it reduces each year's operating loss. The endowment kicked in $32 million in 2005, but that rose to almost $45 million in 2007. The three year average helps smooth each year's market fluctuations, but the market downturn will have an impact.